Lynn Fuller - Chairman and CEO Bryan McKeag - CFO Ken Erickson - EVP and CCO.

Jeff Rulis - D.A. Davidson Jon Arfstrom - RBC Capital Markets Andrew Liesch - Sandler O'Neill Chris McGratty - KBW Daniel Cardenas - Raymond James.

Greetings, and welcome to the Heartland Financial USA Inc., First Quarter 2015 Conference Call. This afternoon, Heartland distributed its first quarter press release, and hopefully you've had a chance to review the results. If there is anyone on this call who did not receive a copy, you may access it at Heartland's Web site at www.htlf.com.

With us today from management are Lynn Fuller, Chairman and Chief Executive Officer; Bryan McKeag, Chief Financial Officer; and Ken Erickson, Executive Vice President and Chief Credit Officer. Management will provide a brief summary of the quarter and then we will open up the call to your questions.

Before we begin the presentation, I would like to remind everyone that some of the information management will be providing today falls under the guidelines of forward-looking statements as defined by the Securities and Exchange Commission.

As part of these guidelines, I must point out that any statements made during this presentation concerning the Company's hopes, beliefs, expectations and predictions of the future are forward-looking statements, and actual results could differ materially from those projected.

Additional information on these factors is included from time-to-time in the Company's 10-K and 10-Q filings, which may be obtained on the Company's Web site or the SEC's Web site. At this time, all participants are in a listen-only mode [Operator Instructions]. As a reminder, this conference is being recorded.

At this time, I will now turn the call over to Mr. Lynn Fuller at Heartland. Please go ahead, sir..

Thank you, Manny and good afternoon. We certainly appreciate everyone joining us today as we discuss Heartland's performance for the first quarter of 2015.

For the next few minutes, I'll touch on the highlights for the quarter and then I'll turn the call over to Bryan McKeag, our EVP and CFO, who will provide additional color on Heartland's quarterly results. And Ken Erickson, our EVP and Chief Credit Officer, will offer insights on credit-related topics.

Well, we're certainly off to a great start in 2015, reporting one of the best quarters in our 34-year history. In today's earnings release, we reported solid net income available to common shareholders of 15.5 million, more than double last year's first quarter earnings of 6.7 million.

Annualized return on average common equity for the quarter reached 13.58% and return on average tangible common equity was 15.67%. Our tangible capital ratio improved to 6.52% for the quarter and that's the best level we've achieved on this major in several years, and well within our target range of 6% to 7%.

On a per share basis, Heartland earned $0.76 per diluted common share for first quarter, again more than double the $0.36 per diluted common share earned in the first quarter of 2014. Book value and tangible book value per common share ended the quarter at $23.59 and $20.41 respectively.

This exceptional quarter maintains the momentum we've been building over the last five quarters. We continue to be happy with our net interest margin, which held up nicely at 3.9%. Our success in maintaining margin above many of our peers is a result of continuous pricing discipline on both sides of the balance sheet.

Net interest income in dollars has also increased steadily for each of the last six quarters. Loan growth of 367 million reflected the impact of the Community Banc-Corp acquisition, which closed in January. Organic growth leveled-off for the first quarter, which is often seasonally slower.

Growth in quality loans remains our number one priority and pipelines for Q2 look stronger. Our credit quality remains exceptional with non-performing loans, total loans holding at 0.64%, just one basis point above the previous quarter. In a few minutes, Ken Erickson will provide more detail on credit-related topics.

Now looking at the balance sheet, total assets increased during the quarter to 6.5 billion, largely attributable to the Community Banc-Corp’s acquisition. Our securities portfolio now represents 25% of total assets and we continue to implement our strategy of converting cash flow from our securities portfolio in the quality loans.

The tax equivalent yield on our securities portfolio increased 5 basis points to 2.92%, while our duration shortened during the quarter from four years down to 3.8 years. Now moving onto deposits, we saw a 64 million in organic deposit growth for the quarter, and continue to experience improved mix.

Non-interest demand now represents 29% of total deposits, with 54% in savings and money market accounts and only 17% in time-deposits. Heartland's residential real estate division led by Paul Johnson, our President, experienced an excellent quarters with originations of 320 million, an increase of 80% over the same quarter last year.

The current purchase to refi ratio was 50/50 with the trend moving toward more purchase business, benefiting from lower interest rates. We have good momentum going into Q2 and Q3, which is traditionally the peak season for new loan originations. Heartland's mortgage servicing portfolio continues to grow, reaching nearly 3.6 billion at March 31.

We showed 25 million of MSRs on our books, which is approximately 9 million less than our evaluation. A key initiative for Heartland is to manage our non-interest expense, as part of an overall effort to lower our efficiency ratio.

To that end, we have implemented the variety process improvement initiatives and efficiency projects, which we believe will move Heartland's efficiency ratio down to 65% by year-end 2016. For the quarter, our ratio increased slightly as a result of acquisition cost. And in a few minutes, Bryan McKeag will address non-interest expenses in more detail.

Expansion of our banking franchise, through both organic and acquired growth, remains a high priority for Heartland. On April 16th, we announced a definitive agreement with Community Banc-Corporation of New Mexico, Inc, parent company of Community Bank in Santa Fe, New Mexico.

Purchase price is 11.5 million in cash, and upon closing, either in the late third quarter or late fourth quarter, Community Bank with 181 million in assets, will be merged into our New Mexico Bank & Trust subsidiary.

Presently, we see the possibly of announcing two more acquisitions yet this year, building on our M&A experience Heartland is in a great position to leverage new acquisitions and relive cost savings. Going forward our M&A team is capable of completing two to three conversions a year.

The acquisition of experienced talent to support Heartland's growth is another major priority for us, as Heartland continues its steady growth in assets for 10 billion and beyond, we recognized the need to add specialized talent. We're excited about the new additions to the Heartland team and the expertise we bring to our business and retail clients.

Recently, we were pleased to welcome new additions to our private clients and wealth management teams, and they include, first, Nancy Tengler, who brings 30-plus years of wealth management experience. She's also held positions as President, CEO and CIO, at a number of large investment advisory firms.

She's also an author and recognized public speaker on investing. Nancy joined Arizona Bank and Trust as Wealth Advisory Services Market Manager in 2014. Second, Patrick Schaefer, also with over 30 years of experience in the financial services industry and former Wells Fargo Wealth Management Regional Manager of investments and fiduciary services.

Pat is an attorney and certified trust and financial advisor and he joined New Mexico Bank & Trust as Wealth Advisory Services Market Manager. And last, Rick Terry another 30-year veteran is a CPA and former COO of DDBA Compass Wealth Management. Rick serves all of our Heartland member of banks as Private Wealth Director.

These individuals joined Kelly Thompson, our new EVP of Private Client Services, who is charged with leading the growth of private banking and wealth management services across the Heartland footprint.

Now looking ahead to the next several quarters, the Heartland Management Team is focused on six critical priorities to sustain and grow our enterprise; and these are starting with number one, most importantly quality loan growth, it's still our number one priority; number two running a more efficient organization; number three, continued emphasis on developing fee income through residential real-estate, treasury management, wealth management brokerage and product services; number four is growth in core DDA savings and money market deposits; number five, successful integration of our previous acquisitions; and last, number six, talent development, leadership training, change management and succession planning.

In concluding my comments today, I'm pleased to report that at its April meeting, the Heartland Board of Directors elected to maintain our dividend at $0.10 per common share, payable on June 5, 2015.

I'll now turn the call over to Bryan McKeag for more details on our quarterly results and then Bryan will introduce Ken Erickson, who will provide commentary on the credit side..

Thanks, Lynn and good afternoon. I'll take a few minutes to discuss the main performance drivers of our results, and provide updates on key operating metrics. And then attempt to summarize a very eventful quarter. I'll start with the loan portfolio, loans held for sale increased 35 million to end the quarter at 106 million.

This increase reflects the pick-up we saw in mortgage activity during the quarter. Loans held for maturity grew 367 million this quarter, ending the quarter at 4.2 billion. Excluding the 395 million added with the Community Bank, Sheboygan acquisition, loans actually declined 28 million.

This is the first quarterly organic decline in loans since the first quarter of 2013. And although, we had a slight decline this quarter, organic growth, over the past 12 months, has been very strong at 271 million or 7.6%. Moving to deposits, deposits increased 498 million this quarter ending at just under 5.3 billion.

The increase was largely due to the Sheboygan acquisition, which accounted for 434 million of the increase. Excluding the acquired balances, demand deposits grew 103 million or 8% during the quarter, with all other interest bearing deposit categories declining 39 million in total.

On the borrowing side, other borrowings declined 35 million during the quarter, as we utilize some of the proceeds of last quarter's sub-debt issuance to redeem 20 million of 8.25% troughs at the end of the quarter.

In addition, we assumed 6 million of variable rate trust in the acquisition of Community, and did not renew another 23 million of 4.4% FHLB advances which matured during the quarter. Shifting to the income statement, net interest margin contracted 4 basis points to 3.9% for the quarter compared to 3.94% in the prior quarter.

As Lynn mentioned in his comments, investment yields increased by 5 basis points, but were offset by 6 basis point increase in the interest cost and an 8 basis point drop in loan yields. More importantly, net interest income continued to grow, reaching a new high of 54.9 million this quarter, up from 52 million in the prior quarter.

For some more color around the decrease in loan yields and increase in interest costs, I would add, first, that core loan rates were up slightly for the first quarter over last quarter, however this is more than offset by decline in loan fees of approximately 700,000 quarter-over-quarter, primarily due to a large one-time fee booked in the prior quarter.

As a result, overall loan yields were down 8 basis points. Second, rates on deposits declined quarter-over-quarter, however again this was more than offset by a full quarter of borrowing cost related to the 75 million 5.75% sub-debt that we issued in mid-December 2014, resulting in a 6 basis point increase in overall cost of funds.

We expect to get some refund borrowing costs going forward from the redemption of the $20 million quarter8.25% troughs and the non-renewal of the 23 million 4.4% FHLB advances, both of which occurred relatively late in the first quarter.

In addition, we have another 90 million of FHLB advances and repos maturing during the second quarter, a deployment rate of 2.15% that should also provide some additional relief primarily in the third quarter and beyond.

Non-interest income, totaling 30.7 million for the quarter, was up 9.4 million compared to last quarter, with higher security gains and mortgage banking activity accounting for nearly all of the increase.

Gain on sale securities was up 3.1 million over the last quarter, as we took advantage of the decline in interest rates during the quarter to sale some longer duration securities at gains and reinvested the proceeds in the shorter duration holdings, resulting in duration of 3.8 years for the investment portfolio, down from 4 years last quarter.

Gain on the sale of loans increased 6 million or 77% from the prior quarter, as mortgage loan application activity was up 69% quarter-over-quarter. The service loan portfolio also continues to grow adding 80 million this quarter, ending the quarter at just under 3.6 billion, the portfolio is growing 491 million or 50% over the past 12-months.

Shifting to non-interest expense, total expenses were 59.6 million, an increase of 5.7 million from the prior quarter, and included 4.4 million of added cost related to the acquisition of Community Bank, Sheboygan in first quarter. The most significant increase was in salary and benefit expenses, which increased 5.2 million over the prior quarter.

Increases in retirement plan and medical benefit accruals, higher payroll tax with holdings, higher commission and the acquisition, all contributed to the increase. In addition, 500,000 of one-time acquisition costs were booked during the quarter in this category.

Professional fees increased $1 million from the prior quarter and $800,000 of one-time acquisition cost was booked during the quarter in this category. Other non-interest expense was down $1 million from last quarter, due primarily to the $1 million cost of tax credits that was included in last quarter’s expenses.

All other expense categories combined roughly net of 500,000 quarter-over-quarter primarily as result to the acquisition. As we expected, our efficiency ratio increased little bit by 1% to 70.95% or from 69.99% last quarter, primarily due to the 1.3 million of one-time acquisition cost we booked this quarter.

Excluding those one-time costs, our efficiency ratio would have improved to 69.4%. The effective tax rate was 32.6% for the quarter, and did not include any historic tax credits. That’s up from last quarter's 26% rate, which did include the impact of some historical tax credits.

To wrap up, I would add the following relative to our anticipated performance for the rest of 2015. Loan growth for 2015 is expected to average around 2% per quarter for the rest of 2015. Net interest income should continue to grow, as we continue to grow loans, with net interest margin expected to remain between 3.85% and 3.95%.

Gain on sale of loans next quarter would normally be expected to show a seasonal pick up. However, due to the higher activity we saw in the first quarter, we expect gain on sale of loans in Q2 to be similar to Q1.

Expenses were likely remain flat next quarter, as the one-time acquisition related costs we booked this quarter, are replaced with new salary merit increases which took effect in April, and a full-quarter Community Bank Sheboygan expenses.

Expenses should show some reduction, after we complete the conversion and integration of Community Bank during the second quarter.

Finally, the Community Bank Santa Fe transaction, we announced earlier this month, is a relatively small all-cash transaction that likely will not be converted until the fourth quarter of 2015, and therefore will have very little earnings impact this year and won’t have much until 2016.

With that, I'll turn the call over to Ken Erickson, Executive Vice President and Chief Credit Officer..

Thank you, Bryan and good afternoon. I will begin by discussing the change in non-performing loans and other real-estate owned. This quarter resulted in non-performing loans rising to 0.64% of total loan. The acquisition of Community Bank & Trust included 6.1 million of non-performing assets, of which 5.8 million were non-performing loans.

The increase was slightly more than the reductions that occurred during the quarter. There are only four non-performing loans with individual loan balances exceeding 1 million. In aggregate, these four loans total 7.3 million, or 27% of our total non-performing loans.

30 to 89 day delinquencies increased to 0.42%, primarily due to the acquisition of Community Bank & Trust. Other real-estate owned increased by 81,000 in the first quarter to 19.1 million. Non-performing assets, as a percent of total assets, was reduced from 0.73% to 0.72% due to the increase in assets.

Other real estate owned continues to sell at or near book value, 2.2 million in cumulative sales of 19 other real-estate properties once recorded in the first quarter, which represented 11.6% of the other real-estate owned as of December 31st. Net loss on repossessed assets, which includes the gain or loss upon sale of those assets, was 361,000.

Collection, ORE and repo expense was 465,000 for the quarter. Our existing portfolio of other real-estate is made up of 18 residential properties, aggregating to 2.9 million and 57 commercial properties that aggregate to 16.2 million. Provision expense was 1.7 million in the first quarter.

726,000 of this provision related to our consumer finance company, Citizens Finance. The majority of the remainder was the result of modest changes in the qualitative components of our allowance methodology. Provision expense would be expected to increase in future quarters, as our loan growth begins to materialize.

And charge-off were minimal at 1.3 million, 603,000 of this amount was taken by our consumer finance company, resulting in only 663,000 of net charge-offs with the entire Bank portfolio.

As shown in the earnings release our coverage ratio of allowance to loan and lease losses as a percent of non-performing loans and leases was 154.83% down from 158.58% as shown at the end of December.

The coverage ratio should continue to increase as non-performing loans are reduced in future quarters and as loans currently covered by the valuation reserve migrate out of the purchase accounting tool and have an allowance established on them.

The allowance for loan and lease losses as a percent of loans and leases decreased from 1.07% to 0.99% this quarter. Evaluation reserve of 17 million is recorded for those loans obtained in acquisitions. Excluding those loans would result in the ratio of 1.14%, which would compare to 1.13% for December 31st.

As mentioned by both Lynn and Bryan, our loan growth occurred due to the acquisition of Community Bank & Trust. Excluding this acquisition, loans held for maturity, were reduced by $28 million.

Within the commercial and agricultural portfolio, new loan production resulted in 68 million of increased outstanding, 39% of the new loan production in the first quarter was in C&I and 38% was in commercial real-estate of which 55% of the CRE loans are owner occupied.

While we have been successful in moving some business from our competitors, 78% of the new money disbursed in the first quarter was for new projects or expansions. Offsetting our new loan production was over 100 million in unscheduled pay downs. 30% were loans paid-off by our competitors, twice the amount we took from them in the first quarter.

We also have 35 million that was unscheduled but not unexpected pay downs that resulted from some larger seasonal reductions and pay downs from customers using their excess cash.

Although, the 10 million of the pay down was the result of either collateral or businesses being sold, we also have 27 million in reduction of credit that have either been asked to leave or have been asked to reduce their level of indebtedness.

Even though we had a slight decrease in loans, excluding the acquisition, our banks remain very positive as their annual goals are obtainable. With that, I will turn the call back to you Lynn. I’ll remain available for questions..

Thanks Ken. Now we’ll open the phone-lines for your questions..

Thank you. We will now be conducting a question-and-answer session [Operator Instructions]. Our first question is from Jeff Rulis of D.A. Davidson. Please go ahead..

Bryan, just further itemized the one-time non-recurring merger cost, is that 1.3 million for the quarter?.

Correct..

And then as you said, the expectation is that, while those will roll-off in Q2, other offsets will keep expenses flat sequentially?.

Yes, I think so, at least for next quarter, and then we’ll have the -- and we should see the effect of the conversion and integration of community after that..

And then I missed the conversion of the -- the expected conversion of depending transaction?.

Obviously, we’re still got lot of work to do, but I don’t see that that will happen anytime before the fourth quarter at the earliest..

And then Butch on your M&A outlook on two to three year, I guess if you could talk about what region perhaps that you are seeing more dialog on the M&A side within your footprint.

Is there any one region that you are seeing more robust discussions occurring?.

You know we've got activity across our entire footprint. And I would say Jeff that most of what you're going to see from us over this year is going to be in footprint.

But as I said in the past, if there is a very high quality, larger entity that is very strategic with high quality management and great earnings track record and very clean assets and we can move to over 1 billion in total assets in a short period of time, much like we told you about Morrill & Janes Bank in Kansas City.

We would take a look at that type of the transaction. But by far the majority of what we're looking at is in footprint, and it's pretty much straight across the entire footprint..

And is that getting granular here -- but the relative to maybe year-over-year your conversations appear to be consistent or any increase, decrease?.

What do you mean year-over-year?.

In terms of -- at this point last year, were you engaged in more M&A discussions than what you are seeing today or less or similar?.

I would say it's similar. It takes a fair amount of time to be able to get the seller position to be able to really say okay let's go forward. And so I would say that it's not uncommon to spend a year discussing the possibility of joining Heartland.

In some cases, it could be less on a smaller transaction where the seller is really very motivated to sell. And those are basically transactions where we just pull them into a current charter. But some of these deals have gone on for years where we actually can bring them to close.

So as I said in the past, they’re trying to keep pretty deep pipeline of somewhere close to 20 deals in some form of discussion. And you just don’t know until they are done, which ones will come to close..

Thank you. The next question is from Jon Arfstrom of RBC Capital Markets. Please go ahead..

Thanks, good afternoon guys. Question for Ken or Butch on the -- just on the pay down activity, seems like some of you loan growth guidance you -- maybe you are signaling that this level is more than aberration in terms of Q1.

Is that a fair way to look at it?.

I would say so. I mean we've had a fair amount of growth since the 1st of April. And I think Lynn had in his comments that first quarter can typically be seasonal for us. I mean we’re in the frost-belt for a 60% of our asset. So construction activity and that type of activity certainly slowed down.

So, I think they had a lot of loans that did closed in the fourth quarter last year that might have taken a little bit of that wind out of the sales for things that were getting ready for the first quarter. So, I see a lot of activity in the pipeline and seen a lot of stuff already happen in the first couple of weeks of April.

So I think it kind of looks like a one-time event in the first quarter..

I would concur with that Jon. And again our loan growth can be lumpy. I mean it's just not that even and a lot goes into it. We get some large pay downs or payoffs.

We had an excellent year last year as you recall we had 380 million of organic loan growth last year, so some of that build-in, didn’t surprise me a lot because we were a little bit slower in the first quarter this year..

And just a couple of more things, maybe give us some updated thoughts on the ag portfolio, and seems like it's relatively healthy.

But may be an idea of kind of the demand and the puts and takes over commodity prices?.

We're just getting through the renewal season right now. You can see that earnings go down a little bit from prior years across the grown crop factor. I guess we're -- we've got a pretty healthy portfolio. We don’t see a lot of begin and strapped in there at the current time.

And so I don’t see any real major changes, and neither our demand that we're having from the ag borrowers or from the credit quality through this year..

And I would agree with that Ken and Jon. Our ag portfolio has been very high quality. It tends to be larger operators that are very well capitalized. And obviously, lower commodity prices are going to have some stress. And it takes a little bit of time for rentals to come down.

But I just don’t see any major problems in that ag portfolio, even with lower commodity prices..

And then I guess a couple of more things. The mortgage number was obviously a positive surprise here. And you talked about your pipelines going forward. It looks like a pretty good mix, the 50-50 mix. But little surprised by the magnitude of the reduction in the guidance Bryan and that’s just -- and services on your part.

Is there something else going on or how can you kind of exceed what you did in Q4?.

Probably as little conservative on my part I guess. But it's a loan-mark and the things that can move around. I get a little nervous about saying that we're going flow it half the quarter when we clearly exceeded what we thought we were going to do. So, so far going into April, the application volumes held up. So we feel good about that.

But I just don’t want to get too far out of our skews here with how sensitive the market can be, the interest rate, if grades sort of move a little bit, et cetera..

And then securities gains will be other thing, I guess was a bit of a -- had an impact on the numbers, what you’re thinking there?.

We typically don’t plan for gains and losses, although we tend to have some gains, at least since I’ve been here we’ve had gains every quarter. We don’t have anything that we're looking at that we need to do. We did a pretty good job, I think, of really trying to pull-back on the duration of the portfolio here when rates dropped this last time.

And so, unless we see a real unusual event, I think we’ll probably not going to see a lot this next quarter..

Thank you [Operator Instructions]. And our next question is from Andrew Liesch of Sandler O'Neill. Please go ahead..

Just curious on the Community deal, I think you mentioned in the release about 1.5 billion of non-interest income so far this quarter.

How is that tracking relative to your initial expectations?.

I think that’s actually -- probably a tad bit higher, but not too far out of what we thought. One thing that did happen, I looked back and what I've said last quarter I think I said we thought it was going to be maybe 750,000-800,000 and then there might be some in the following quarter.

I think we did a pretty good job of getting firing up along on the consolidation and integration process that we pulled all that. And I think we got most of it this quarter. So, I think it's pretty close to what we thought..

And then on the securities that were sold then reinvested in something with lower duration.

Just curious what was the yield on what you sold versus what do you have and what you purchased?.

I don’t have that I have some of the duration. I know that we were selling out of some longer bullet type instruments that had like five to seven year duration in the MBS portfolio. And Zack’s been buying back some SBA floaters and things like that that had much shorter duration. So, I don’t have that in front of me, sorry about that Andrew..

That’s fine, because the floaters I mean that probably positions you better for higher rates then too, right?.

That’s exactly what we're trying to do. So I'm sure that we gave up some on rates to reposition into a shorter period. But again, the whole quarter security book actually had uptick in its yield. So, I think that’s going to hold at least as far as what we think we’ve got in the portfolio, unless rates truly change again..

Thank you. The next question is from Chris McGratty of KBW. Please go ahead..

Bryan I apologize, could you kind of allocate a $1.3 million, I think, of one-timers in the quarter?.

About 0.5 million, was in the salary area and then about 800,000 related to contract terminations, et cetera, and that hit in the professional fees area..

And then to include the loan growth of 2%, that’s a non-annualized numbers, that would be like an 8% annualized rate?.

Right, that's right..

That’s helpful, thanks. On the mortgage, your gain on sale margins obviously gap that quite a bit. So, I guess on a usual side from better conditions that may have led to the [indiscernible].

Not that I can put my finger on, or that I’ve heard..

Well above 300, we’re pretty consistently running on 300 bps..

And the last question just on the margin, Bryan.

You took 385 to 395 but given the restructuring, is the deal coming through is a fair thought upward bias to that number and then kind of subject to the market kind of compression that we're experiencing subsequent to the back-half of the year?.

I think so. I'm always hesitant when it comes to margin because there is so many moving pieces and you got fees going through there. But I would characterize it the way, I think it could go up a little bit this next quarter.

And then one thing we do have is that one of our acquisitions, M&J, some of that purchase accounting starts to wean off in the second half of the year. So, we may come back down a little bit because of that. So it could go up a little bit and then come back down. And there is lot of things that could cause me to be wrong on that..

My last question is on the securities book, should we be thinking about kind of 1.6 billion range given the yield environment and given the expectations for loan growth kind of kick-up in the back half of the year, should we assume some sort of moderation in the securities book?.

Moderation mean in terms of its size or the marker?.

No, I mean the outlook for the size and international book to dollars?.

I think -- Lynn you can jump in here, and we're getting down to that 125, so I don't think. We'll continue to use some of that cash flow to move it into the loan book as we can. But we're trying to get to a point where we're not going to force that to happen.

And once we get couple of percentage points lower, we're probably going to stop and try to hold on to that portfolio, once we get to 20% or, so I don't think we're looking it to drop below that..

I agree with that. The range that we said in our ALCO meeting is somewhere between 20% and 25%. Now some of the banks would be a bit less than 20 some or way too high yet. So, we have to work -- it's harder, but we're looking companywide to be in that range of 20% to 25%..

Thank you [Operator Instructions]. And the next question is from Daniel Cardenas of Raymond James. Please go ahead..

Just a couple of quick questions, one on the house-keeping side, how should we think about your tax rates for the rest of 2015?.

I think what I would do is -- our marginal tax rate I think is in the high-30% range, so probably 38 or so would be our marginal rate. So if you kind of took pretax dollars from where we were this quarter, if you get more pretax dollars in your model you want to bring those in that 38%. If you get less, you probably take 38% of that lower numbers.

So that's the way I think about it. So I don't think -- we do have some historical tax credits that we continue to work on. But those I never -- I am sure when those are going to hit exactly. So, I think you should model that 32% off of the current number and then up and down at that marginal rate of 38%..

And then just a quick question on the M&A and I am sorry if you’ve already you've mentioned this before.

But when you -- in your discussions, I mean are those -- and the companies that you're having discussions with right now, were they typically be in that 500 to $1 billion range or are they typically smaller or larger?.

They are on the range anywhere from -- I mean the smallest would be 100 and they range up to 750, would be a pretty good range. And it just -- we can do more of those small deals because they're end-market and basically just fold of the branches in more like a branch purchase almost.

But the larger deals we get the 750, they take a little more work in it. We're creating the new charter of course that's more work in it, we're just merging them into one of our current charters..

Thank you. We have no further current questions in our queue at this time. I would like to turn the conference back over to management for any additional remarks..

Thanks Manny. Well, in closing, we're obviously very pleased with Heartland’s solid financial performance for the first quarter of 2015.

We're off to a great start in this excellent quarter along with our five quarter-trend is evidence of the commitment we've made to our master strategy of balanced property growth as we continue to pursue our historical goal of doubling, both earnings and assets, every five to seven years. So, I’d like to thank everyone for joining us today.

And hope you can join us again for our next quarterly conference call, which is going to be on July 27, 2015. So, thanks again and have a good evening, everybody..

Thank you. Ladies and gentlemen, this does include today's teleconference. You may disconnect your lines at this time. And thank you for your participation..